Legal risks of owning cryptocurrencies
Publication Type
Book Chapter
Version
publishedVersion
Publication Date
9-2017
Abstract
Cryptocurrencies like Bitcoin have matured from being associated exclusively with techies and radicals to being considered by central banks as a technology to implement digital money. Cryptocurrencies exist only in digital form and can be transferred completely between digital addresses. This is both unlike conventional electronic money as understood by laypersons which acts as a debt claim on a deposit with a trusted financial institution such as a private bank and unlike conventional corporeal money which may be physically possessed. This means that any legal rights associated with holding cryptocurrencies must be different despite it being remaining open to interpretation. In this chapter, we look at the various treatments of money in the legal sense and discuss the risks associated with each by drawing on real life examples. We conclude that fraud through hacking could potentially pose a problem to widespread adoption of cryptocurrencies as the absence of recourse against a third party such as a bank concentrates risk in holders of cryptocurrencies. Users should thus exercise caution and understand the risks before investing in cryptocurrencies. This warning requires emphasis as many parties misapprehend the cryptography within the technology as protecting them from such fraud when in fact it does no such thing.
We discuss the various legal treatments of both non-digital and digital money before crytocurrencies came about. This is followed by an introduction to Bitcoin/cryptocurrencies and how they work differently from money as we know it. We then look at the legal risks associated with cryptocurrencies and associate them with some real-life examples.
Discipline
Commercial Law | Finance and Financial Management
Research Areas
Public International Law, Regional and Trade Law
Publication
Handbook of Digital Finance and Financial Inclusion
Volume
Vol 1: Cryptocurrency, FinTech, InsurTech, and Regulation
Editor
David Lee Kuo Chuen & Robert H. Deng
First Page
225
Last Page
248
ISBN
9780128123003
Identifier
10.1016/B978-0-12-810441-5.00010-5
Publisher
Academic Press
City or Country
London
Citation
LOW, Kelvin F. K. and TEO, Ernie.
Legal risks of owning cryptocurrencies. (2017). Handbook of Digital Finance and Financial Inclusion. Vol 1: Cryptocurrency, FinTech, InsurTech, and Regulation, 225-248.
Available at: https://ink.library.smu.edu.sg/sol_research/2485
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/B978-0-12-810441-5.00010-5